Household tap data collection under Jal Jeevan Mission held exempt from GST as pure services under Notification 12/2017

The AAR held that the applicant's activities of collecting household-level data through a mobile app for Functional Household Tap Connection (FHTC) under the Jal Jeevan Mission constitute pure services, with no supply of goods involved. These services are integrally connected to supply of safe and quality drinking water through piped water supply schemes and relate to functions under serial no. 11 of the Eleventh Schedule to Article 243G and serial no. 5 of the Twelfth Schedule to Article 243W. Accordingly, the services are classifiable under serial no. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended), and are exempt from GST.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether services of collecting household data through mobile app for Functional Household Tap Connections under a State water distribution programme qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended.

1.2 Whether any determination of classification and rate of tax is required if the exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) is held applicable.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Exemption as "pure services" under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

(a) Legal framework discussed

2.1.1 The Court refers to Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended), which exempts from GST "pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution".

2.1.2 The Court identifies three cumulative conditions for exemption under the said entry: (i) the supply must be "pure services", i.e., not a works contract or other composite supply involving any supply of goods; (ii) the services must be provided to the Central Government, State Government, Union territory, local authority or Governmental authority; and (iii) the services must be "by way of any activity in relation to" any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W.

2.1.3 The Court refers to the definitions and constitutional framework: the concept of "pure services" as understood from the notification; the statutory definition of "composite supply" in section 2(30) of the GST Act; and the constitutional allocation of functions to Panchayats and Municipalities under Articles 243G and 243W read with the Eleventh and Twelfth Schedules, specifically noting Eleventh Schedule entry 11 ("Drinking water") and Twelfth Schedule entry 5 ("Water supply for domestic, industrial and commercial purposes").

2.1.4 The Court also notes the policy context: the Jal Jeevan Mission (JJM) as a Central Government programme aimed at providing safe and adequate drinking water to rural households through Functional Household Tap Connections (FHTCs), implemented at the State level through the Public Health Engineering (PHE) Directorate; and the use of digital/GIS-based systems and surveys for monitoring piped water supply schemes and FHTCs.

(b) Interpretation and reasoning

2.1.5 On the second and third conditions, the Court finds that the services are provided to the State Government, represented by the PHE Directorate of the Government of West Bengal, thus satisfying the requirement that the recipient be Government or a specified authority.

2.1.6 The Court finds that the activities in question-collection of field-level data of Functional Household Tap Connections (FHTCs) through mobile app or hard copy, including geo-referencing, under a PHE Division-are directly in relation to supply of safe and reliable drinking water to rural households under piped water supply schemes as part of JJM. These activities are held to be in relation to the functions of "Drinking water" under Eleventh Schedule entry 11 to Article 243G and "Water supply for domestic, industrial and commercial purposes" under Twelfth Schedule entry 5 to Article 243W. Accordingly, the "in relation to" requirement vis-à-vis Panchayat/Municipality functions is held satisfied.

2.1.7 On the first condition, the Court examines whether the services constitute "pure services" or involve any works contract or composite supply with goods. It relies on the work order placed on record, which describes the scope as collection of FHTC field-level data via mobile app or hard copy, including geo-referencing and integration with digital management/asset systems.

2.1.8 The Court notes that the described activities pertain to data collection, use of software and applications, digital asset management, GIS/WebGIS-based mapping, and related data management and analysis. It finds no element of supply of goods and no indication of any works contract or naturally bundled supply of goods and services. It therefore concludes that the services under the work order do not represent any works contract or composite supply involving goods.

2.1.9 On this basis, the Court characterizes the impugned activities as "pure services" within the meaning of Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate).

(c) Conclusions

2.1.10 The Court holds that: (i) the applicant's activity of collecting household/FHTC data through mobile app or hard copy, including geo-referencing, under the PHE Directorate, involves no supply of goods and is a "pure service"; (ii) such services are provided to the State Government (PHE Directorate), a qualifying recipient; and (iii) the services are by way of activity in relation to functions of drinking water/water supply entrusted to Panchayats and Municipalities under Articles 243G and 243W. All conditions for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) are thereby satisfied.

2.1.11 The Court therefore answers in the affirmative that the services of collecting household data through mobile app for FHTC connections in relation to water distribution networks are classifiable under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) and are exempt from GST.

2.2 Necessity of determining classification and rate of tax in the alternative

(a) Interpretation and reasoning

2.2.1 The second question, concerning the appropriate classification and rate of tax if the exemption were not available, is taken up only contingently by the Court. The applicant had suggested classification under SAC 998314 with 18% GST if exemption was denied.

2.2.2 As the Court has already held that the services qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), it considers that the contingency underlying the second question does not arise.

(b) Conclusions

2.2.3 The Court declines to determine any alternative classification or rate of tax, holding that the second question "does not arise" in view of the affirmative ruling on exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate).

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